‘Takings’ case may be human rights issue

SACRAMENTO — An attorney who defends low-income people against local government takings likes to say that “property rights are human rights.” It’s not much use to have the right to speak out, he argues, if you don’t have the right to be secure in your property.

We chatted years ago when a county was using eminent domain — government’s right to take property, after paying fair compensation — to acquire modest lake-area homes on behalf of a developer. Owners called the neighborhood a “poor man’s Shangri La,” but officials said it was a public use to turn the area into an upscale development.

My attorney friend viewed it as an affront to the rights of the mostly retired owners. Most Americans seemed to agree. After the U.S. Supreme Court ruled in the 2005 Kelo v. New London case that localities could use eminent domain for “economic development,” a public backlash ensued given the seeming unfairness of these “take from the poor, give to the rich” policies.

Eight years later, another landmark property-rights casemay be headed to the nation’s highest court. It involves a similar question that was at the heart of Kelo, but applies it to different circumstances: When can government take the value of private property through regulation and transfer it to a different set of owners?

The court is deciding whether to hear this new case, which centers on the city of San Rafael’s rent-control ordinance. Here it harms an out-of-state developer and benefits local mobile-home residents, but many of the same principles are at stake even if the economic conditions of the beneficiaries and losers are swapped.

In California, mobile-home residents typically own their homes but rent the land from the park owners. When owners sell their home, the park management must lease the underlying property to the new purchaser. A park owner is limited in the ability to evict a mobile-home owner, based on state law.

In 1989, that Marin County city passed a rent-control ordinance limiting rent increases in these parks. In 1993, it required that land owners keep the rent at the same price even after a mobile-home owner sells the home to a new owner. In 1999, the city further toughened the law, limiting rent increases to 75 percent of the Consumer Price Index.

Frustrated at how limited they were to adjust rents or recoup capital costs, Contempo Marin park owners in 2000 filed suit. The district court found that the city’s ordinance reduced the property’s value from $120 million to $23 million, and ruled in the park owners’ favor.

The city claimed that its ordinance would improve affordable housing, but the court found it troubling that a group of politically active residents lobbied the City Council for a law that inflated the value of each mobile-home by an estimated $100,000. (These days, those mobile homes — located in a prime location near the bay — can be priced at more than $300,000, so it’s not poverty row.)

But the Ninth Circuit Court of Appeals overturned the decision. Unless a government takes the entire value of a property, it ruled, the owners have no right to compensation. It gave governments the widest latitude to pass such laws — as long as there is some plausible public-policy purpose. And it disputed the owners’ claim of loss, given that they purchased the property after the city passed its first ordinance.

“(T)hose who do business in the regulated field cannot object if the legislative scheme is buttressed by subsequent amendments to achieve the legislative end,” cited the court. But every business is regulated, so that could have far-reaching results for those that want to challenge rules that become too onerous.

This case gives the court a chance to revisit an issue flagged in Kelo, said Bradley Benbrook, a Sacramento attorney who co-authored a brief asking the court to review the property owners’ appeal. “Courts have to take seriously claims that a local government’s alleged ‘public use’ is really a disguised transfer of value from one private party to another,” he told me.

And it also gives the court another chance to evaluate whether a “taking” is just a simple economic matter, or whether it treads on something more fundamental to our humanity.